Xiaomi Probe Tests India’s Balance on Chinese Investment

A compliance case with strategic overtones

The SFIO recommendation reportedly centers on whether Xiaomi’s business model, ownership structures and investment approvals complied with India’s foreign-investment rules after New Delhi imposed tighter controls on investors from countries sharing land borders with India.² The memorandum cited by Reuters called beneficial ownership of foreign investors and group entities a central issue, including whether direct or indirect ownership, control or changes in control were disclosed and approved as required.²

Xiaomi told Reuters it had not received any notice or communication from the SFIO and said it gives paramount importance to Indian law and complies with it fully.² The Ministry of Corporate Affairs and the SFIO did not respond to Reuters queries, according to the Reuters wire version.³

If approved, a deeper investigation would add to Xiaomi’s long-running regulatory troubles in India. The company has been unable to overturn a freeze of 55.51 billion rupees, or about $584 million, in Indian bank assets imposed in 2022 over alleged illegal remittances, allegations Xiaomi denies.³ It also faces tax demands and royalty-payment disputes, according to the Reuters-syndicated reports.²

The company’s commercial position has weakened. Xiaomi’s India smartphone market share has fallen to 13%, placing it fourth, from 19% earlier. Its India revenue in 2025 was $2.52 billion, about 40% below the level three years earlier, Business Today reported, citing Counterpoint Research and Reuters.²

The post-2020 investment regime remains sensitive

India tightened foreign direct investment rules in April 2020, making prior government approval mandatory for investments from countries sharing a land border with India. The measure was widely understood as aimed at Chinese capital after the border crisis.⁷ Reuters reported that the stricter rules required prior approval for investments by Chinese entities and that companies, including Xiaomi, had said the process caused delays.³

Those controls have become a durable policy irritant. New Delhi has signaled some selective easing this year while keeping national-security review in place. ThePrint reported that India relaxed rules in March for certain minority investments from land-border countries, including China, with changes intended to facilitate capital flows while preventing Chinese control of Indian companies.⁷

The same report said India allowed some Chinese-linked power-equipment companies with Indian manufacturing operations to participate in government tenders and approved a manufacturing partnership between Dixon Technologies and Vivo, while rejecting other proposals on security grounds.⁷

That combination — limited opening paired with firm scrutiny — is the policy balance now being tested by the Xiaomi matter. For India, the case is likely to be framed as an enforcement question: whether a major foreign company met disclosure, ownership and approval requirements. For China, it fits a broader concern that regulatory and security tools could constrain Chinese firms even as leaders seek to stabilize political ties.

Diplomacy and business climate converge

The BRICS summit gives both governments an incentive to avoid letting a corporate case dominate the agenda. The Associated Press reported from New Delhi that the gathering comes as India seeks to balance ties with China and Russia against deepening partnerships with the United States and other Western powers, while using the summit as an opportunity to manage its relationship with Beijing.⁹

Xi’s visit will be his first to India in seven years and could help consolidate a recent diplomatic thaw, AP reported, though it noted few signs of a recovery in trade and business ties.⁹ ThePrint similarly described Xi’s visit as coming amid efforts to stabilize relations while unresolved differences persist over the boundary, trade and market access.⁷

The Xiaomi case therefore sits at the intersection of three Indian priorities: enforcing corporate and FDI rules, reducing perceived security risks linked to Chinese investment, and attracting capital and technology for manufacturing. How New Delhi handles the SFIO recommendation — whether it approves a deeper probe, narrows the inquiry or lets other agencies proceed — will be watched by Chinese firms and by governments assessing whether India’s tighter screening regime can coexist with predictable treatment of foreign investors.